Wyn­ter tries to calm forex fears

CEN­TRAL BANK chief Brian Wyn­ter says the Ja­maican cur­rency is fairly valued at its cur­rent rate even as the pace of de­pre­ci­a­tion ac­cel­er­ates.

For the fis­cal year to date, April 1 to Novem­ber 11, the Ja­maican dol­lar lost 5.9 per cent of its value rel­a­tive to the US dol­lar, faster than the 4.2 per cent recorded dur­ing the same pe­riod last year.

The Ja­maican dol­lar traded at 129.09 on Fri­day, but on Mon­day, the day of the Bank of Ja­maica gov­er­nor’s quar­terly press brief­ing, it ap­pre­ci­ated to $128.99.

Cor­po­rate lead­ers have been vo­cal with their con­cerns re­gard­ing the per­for­mance of the dol­lar and what it means for the cost of do­ing busi­ness. Today, Wed­nes­day, the mem­bers of the Ja­maica Man­u­fac­tur­ers’ As­so­ci­a­tion will get to pitch ques­tions to BOJ rep­re­sen­ta­tives at a spe­cial fo­rum.

At Mon­day’s press brief­ing, Wyn­ter, who ac­knowl­edged con­cerns re­gard­ing the fall in the value of the JMD, said most of the move­ment in the ex­change rate hap­pened in April and May, but since then, the mar­ket has re­turned to more or­derly trad­ing pat­terns with the last three weeks re­flect­ing a small ap­pre­ci­a­tion.

READY TO MEET SHORT­FALLS

The BOJ gov­er­nor said the cen­tral bank sold US$475 mil­lion into the mar­ket dur­ing the first six months of the fis­cal year, April to Septem­ber.

“We stand ready to sell for­eign ex­change to meet any short­fall that threat­ens sta­bil­ity,” he added.

Wyn­ter said the cen­tral bank is tem­po­rar­ily tight­en­ing Ja­maica dol­lar liq­uid­ity in the Brian Wyn­ter, gov­er­nor of the Bank of Ja­maica.

short end of the mar­ket – that is, its weekly 14-day repo auc­tions – to in­flu­ence at the mar­gin the choices that port­fo­lio man­agers make.

The BOJ is ex­er­cis­ing its op­tion to re­pay early US$255 mil­lion worth of US dol­lar cer­tifi­cates of de­posit, giv­ing the con­trac­tu­ally re­quired three months’ no­tice.

“We are tak­ing steps to per­suade hold­ers of these US-dol­lar CDs to take back their money from us even ear­lier,” Wyn­ter said.

Wyn­ter ex­plained that with a level of about US$3 bil­lion in gross re­serves rep­re­sent­ing am­mu­ni­tion, the BOJ has to be used in an emer­gency or to deal with the for­eign ex­change mar­ket, plus the avail­abil­ity of US$1.64 bil­lion un­der Ja­maica’s new standby ar­range­ment with the In­ter­na­tional Mon­e­tary Fund (IMF), the bank had more than ad­e­quate re­serves.

He af­firmed that there was no short­age of for­eign cur­rency, in a push­back on pub­lic ut­ter­ances to the con­trary.

Wyn­ter also said the BOJ be­gan rais­ing for­eign cur­rency re­serve re­quire­ments in or­der to re­duce the in­cen­tive for hold­ing for­eign cur­rency de­posits, say­ing it should rise by three per­cent­age points in phases, to reach 12 per cent by De­cem­ber. That ra­tio would put it on par with cash re­serve re­quire­ments for Ja­maican dol­lars.

The cash-re­serve ra­tio for for­eign cur­rency was last ad­justed in 2010 when it was cut from 11 per cent to 9 per cent.

A work­ing group has been formed at the re­quest of Fi­nance Min­is­ter Aud­ley Shaw to ad­dress the de­pre­ci­a­tion of the Ja­maican dol­lar. It’s chaired by Gov­er­nor Wyn­ter and in­cludes par­tic­i­pants in the for­eign ex­change mar­ket and pub­lic of­fi­cials.

MAR­KET TRANS­PARENCY

Wyn­ter said that in the in­ter­est of mar­ket trans­parency, if non-pub­lic in­for­ma­tion is pro­vided to mem­bers of the work­ing group, it will also be made avail­able to all mar­ket par­tic­i­pants.

At the press brief­ing, the cen­tral bank chief other­wise re­ported that the cur­rent ac­count of the bal­ance of pay­ments for the June quar­ter is es­ti­mated to have been a very small deficit of US$13 mil­lion, com­pared to a deficit of US$118 mil­lion for the June 2015 quar­ter.

For fis­cal year 2016-17, the cen­tral bank is pro­ject­ing that the cur­rent ac­count deficit will be equiv­a­lent to about three per cent of GDP.

Although higher than the 1.8 per cent out-turn dur­ing the last fis­cal year, it is much lower than the 10 per cent to 14 per cent ex­pe­ri­enced in the years be­fore the IMF’s Ex­tended Fund Fa­cil­ity, Wyn­ter said.

BOJ is also pro­ject­ing gross for­eign di­rect in­vest­ment in­flows at close to the US$950